Disrupting the Housing Market

You don’t have to be that close a student of politics to realise there is a fundamental change in the way politics works these days. The Brexit vote, Trump, the potential rise of UKIP and FN in France indicates a shift in the balance of power between ruler and ruled. Everywhere the discourse is around ‘taking back control’, disruption, and anti-‘elitism’ (even if those ‘taking back control’ seem suspiciously establishment themselves.)

Yet I’m convinced this ‘populism’ will move beyond wider politics and enter other sectors of the economy — like housing. People are rising up and looking to disrupt systems that don’t work. We see it already in areas like rail transport, and I’m convinced that we’ll start seeing the ‘broken’ housing sector be disrupted in the same way.

Disruption usually occurs when top-down markets fail to deliver what people want. Closely controlled levels of supply, poor quality service, higher prices than the majority of people can afford — the mantra applies to train travel as much as it does our housing market. And disruption in almost all cases involves giving power back to the people to help them realise their own demand.

There is a huge, proven demand in the UK for people to build their own homes. Why are we waiting for developers to up their supply here and there? Why instead aren’t we liberating our citizens to create their own homes and satisfy themselves?

This is the very definition of disruption, and yesterday’s White Paper, while hardly completely liberating would-be self builders from the usual shackles, goes some way to making things easier for ordinary people to deliver.

The thing is, disruption usually happens quicker than the timelines that we’re talking about. I often hear people in the self build sector talk about it needing a generation for the housing market to change. I’m not convinced that people struggling to get on ‘the housing ladder’ in their mid 20s (who would very much like to design and build their own customised home in the way that pretty much everything else in their lives are customised) will be patient enough to wait until their 50s to realise their dreams.

Comments

Peter Eade

Affordable Self-Build?

There are many government sponsored schemes which are designed to help get people onto the property ladder, these include mortgage guarantees, shared ownership, help to buy equity loans etc,. Despite all of these efforts there is still a housing shortage and as far as I’m aware there are no schemes specifically designed to help self-builders. When politicians talk about the shortage of housing they continually say that more affordable housing is the answer. The fact is few houses that are built by developers or builders as a commercial enterprise can be considered as affordable. The reason is obvious; if a builder sells cheaply by having very tight profit margins the person buying will within a year or two be putting the ‘affordable’ house back on the market at its full market value. There is little incentive for private enterprise developers to build properties specifically for rental as most new build projects are funded by banks who expect to see a fast return on their investment. When local authorities started to build council housing at the end of the First World War the houses were erected as ‘homes for heroes’. This council house building scheme continued through into the nineteen sixties but by then the number of local authority houses being built each year had begun to drop off. By the time Mrs Thatcher came to power the idea of council housing was kicked right out of fashion and tenants were given the opportunity to buy with over two million families taking up the offer. Today few local authorities have a coordinated policy of rental house building and look to housing associations to take up the challenge. There might yet be a way local councils could still help with alleviating the need for more housing, this could be achieved by their taking on the responsibility of providing building sites for people wishing to build their own homes. There really is no shortage of land and anyone who drives round any town or city can’t help but notice numerous empty brown field sites. There are also empty or derelict houses and many single sites, all quietly waiting for someone to do something with them. Even in rural areas there are many places where houses could be built without ever straying into green belt territory. One way of achieving housing that is more affordable would be for the local authorities to buy these sites and grant planning permission. Initial funding would come from central government to allow each council to purchase the land at its true market value. Typically a brown field site could be divided up into individual plots each with planning permission for a detached dwelling. The land would then be offered for sale at a government subsidised price. The mortgage for each site would be repayable to the council over a twenty five year period and early settlement would not be permitted. The sites would only be available to individuals who wish to self-build and would exclude developers or those who want to build for buy to let. The funding for the built costs would be covered by a normal mortgage. There would be restrictions in place which would ensure that if the house is sold before the completion of the payment of the council twenty five year land mortgage it would be have to be sold at a price which would be based upon the original build costs plus the amount paid off on the mortgage for the land. This would ensure the house will still be considered affordable if it came on to the market. This resale policy may not be too attractive to all potential self-builders but if at the outset this is known then only those who plan to stay for a long period would want to get involved. It’s a fact that most self-builders build with the intention of living in their new house at least up to retirement age, by which time the council land mortgage and the build cost mortgage would be paid off and the house could then be sold at its true market value. In addition to the affordable element of this scheme there would be the prospect of more attractive estates of individually designed houses. Something that is often missing when developers erect bland houses which are nothing more than accountant designed boxes.

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